Growth pulls oil demand, BP spill adds to uncertainty: IEA

Economic growth is raising estimates of oil demand, but recovery is at risk and the Gulf of Mexico disaster is putting new deep-water oil exploration on a "knife edge," the IEA said on Wednesday.

There is a "significant" risk to the latest upgraded forecast for oil demand, which in any case points to a slight net fall in advanced economies in 2011.

The IEA also warned that the BP disaster in the Gulf of Mexico put the prospects for the oil industry of being able to access new deepwater energy resources in many countries "on a knife edge."

This was because of uncertainty over how the disaster might result in restrictions on licences for drilling.

However, so far there was little evidence that exploration potential was being directly held back by regulatory action, it said.

The International Energy Agency raised its estimate for worldwide demand for oil this year by 80,000 barrels per day, and for next year by 50,000 barrels per day.

This was on the basis that the global economy would grow by 4.5 percent this year but by 4.3 percent in 2011.

"However, concerns that the global economic recovery may falter from the second half of 2010 pose a significant downward risk to the forecast," it said.

The outlook for oil prices was also therefore "uncertain," added the IEA, the oil strategy arm of the 31-member Organisation for Economic Co-operation and Development (OECD).

The agency highlighted conflicting views of growth prospects.

"Concerns about an impending global economic slowdown would appear exaggerated," it said. But then, in analysing price pressures, it observed: "Some economists have also not ruled out a double-dip recession, which would have a significant impact on oil demand forecasts."

The IEA's monthly report also made two other important observations.

It estimated that production from the Gulf of Mexico would be cut by 60,000 barrels per day this year and by 100,000 barrels per day next year "on the assumption that a handful of identified projects will be delayed by 6-12 months."

Much depends on changes to regulations on deep-water drilling, but "the impact is relatively small."

A wider factor, the IEA noted, was the extent to which the spill would lead to a tightening of rules and a discouragement of exploration in other parts of the world.

In other countries "we do not so far identify any impact on production." Previously, the IEA had estimated that a delay of one year to projects in Angola, Brazil and Nigeria could cut production by 500,000 to 600,000 barrels per day by 2015.

The second observation was linked to this.

The price of oil had gone from 15 dollars per barrel in 1994 to 100 dollars in 2008 and 60 dollars in 2009.